Contract Law Pluralism: Incoherent, Incorrect or True?

Without mentioning me by name, contract law scholars Robert Scott and Jodi Kraus provide an account of why pluralist conceptions of the law of contracts--like mine-- are wrong as a matter of historical interpretation and inconsistent with the only true account of contract law.

(For my pluralistic accounts of contract law you can read Principled Pluralism and Contract Remedies (here) or Mission Possible: A Paradigm for Analysis of Contractual Possibility (here). For shorter pluralistic observations read my blogging trilogy of The Aesthetics (!) of Contract Theory posts here, here, and here.)

Scott and Kraus explain why they believe pluralistic accounts such as mine (actually, they  cite only a few academics who take a pluralistic perspective, a troubling omission) are balderdash in The Case Against Equity in American Contract Law (download here). Quoting their abstract in full:

The American common law of contracts appears to direct courts to decide contract disputes by considering two opposing points of view: the ex ante perspective of the parties’ intent at the time of formation, and the ex post perspective of justice and fairness to the parties at the time of adjudication. Despite the black letter authority for both perspectives, the ex post perspective cannot withstand scrutiny. Contract doctrines taking the ex post perspective — such as the penalty, just compensation and forfeiture doctrines — were created by equity in the early common law to police against abuses of the then prevalent penal bond. However, when the industrial revolution pushed courts to accommodate fully executory agreements, and parties abandoned the use of penal bonds, the exclusively ex ante focus of the new contract law that emerged rendered the ex post doctrines obsolete. While intended initially to do justice between the parties, if used today these doctrines perversely and unjustly deny parties contractual rights that were bargained for in a free and fair agreement. Yet judges continue to recognize the ex post doctrines, even as they struggle to reconcile them with respect for the parties’ intent. Although infrequently applied, the ex post doctrines are far from dead letter. The penumbra of uncertainty they cast over contract adjudication continues to undermine contracting parties’ personal sovereignty. The only case for continuing to recognize these equitable interventions, therefore, must turn on whether they serve a new valid purpose. We consider and reject the possible purposes of paternalism and anti-opportunism suggested by contemporary pluralist scholars. In our view, the criteria governing theories of legal interpretation support the interpretation of contract law as exclusively serving personal sovereignty rather than any pluralist interpretation. Under its best interpretation, contract law has no place for the ex post perspective. (Emphasis added.)

In short--very short-- Kraus and Scott argue that only personal sovereignty (their revision of the more common turn of phrase, personal autonomy) provides the "fit" for the majority of existing rules of contract law and, therefore, outlying rules are erroneous. Their argument is stronger than my brief comments might suggest. They do not engage in hand-waving denunciations but make an historical and theoretical argument for their conclusion. But ...

They fail to persuade me. First, Kraus and Scott stand solidly in the modern liberal tradition. That is, they do not indicate any belief (at least any belief that is admissible in public discourse) that there may be norms that cabin personal sovereignty. In other words, they don't seem to believe in Justice or the virtues of which justice is a prime example.. As they explain in an aside in a footnote:

Legal prohibition of victimless crimes constitutes a form of legal moralism, which condones legislation that restricts individual liberty in order to vindicate a socially designated conception of the good. If the public policy doctrine refuses to enforce agreements because they further a purpose deemed immoral according to a designated social conception of the good, the doctrine is incompatible with respect for individual autonomy.

("Victimless crimes" for Kraus and Scott are no more than examples of "socially designated conceptions of the good." Belief that there may actually be extra-social Good doesn't cross their minds. Of course, belief in the Good nowadays is largely reserved to the intellectual backwaters. It is rarely advanced in mainstream legal academia.)

Second, and equally telling, Scott and Kraus fail to interact with the leading academic proponents of contract law pluralism. Included among such academics are Omri Ben-Zivi, Robin Bradley Kar, and Roy Kreitner. There are others such as Nate Oman (most recently here) and me, but Kraus and Scott engage meaningful only with Theodore Eisenberg. They would be more persuasive had they taken on the best in the field.

Third, while claiming to ground their valorization of personal sovereignty in the history of the common law, Kraus and Scott are actually reading a 20th century ideology into the earlier common law. The common law was (and to a lesser extent still is) an historical tradition (adversions here). Until the nineteenth century the common law did not instantiate any ideology; it was a form of practical reasoning. As philosopher Gerald Postema recently explained in an interview (here),

The classical common law view was that, fundamentally, law is not a set of rules, but rather a discipline of practical reasoning—a public discipline, or a discipline of public practical reasoning.

So these considerations—the common or public nature of some practical reasoning, especially that associated with social rules and the fundamentally discursive nature of law—forced me to think more broadly and to give up the idea that we could explain the normative foundations of law using the coordination game model. I undertook to look more broadly at customs or social norm as rules of a community in which their social character of is intrinsic to the kind of rules they are. (Emphasis added.)

In addition, I believe that my book chapter "Revisiting Unconscionability: Reciprocity and Justice" (download here) demonstrates that the effort of Scott and Kraus to cabin the origins of ex-post contract rules to the English courts of equity is simply wrong.

Finally, Kraus and Scott sorta' kinda' admit that pluralism might actually provide a better fit if one takes into account all extant rules of contract law. Yet, that's still no reason to accept a pluralistic account because, according to them:

Pluralism’s superior fit with contract law does not provide a reason to prefer it over the personal sovereignty interpretation. This is because pluralism lacks the theoretical resources needed to identify as invalid one among multiple doctrines that may comprise contract law.

This assertion would be true but only if we begin with the conclusion that the single perspective that explains more of the rules than any other perspective is presumptively the one and only correct perspective. Why, one might ask, is the burden of proof on the pluralist? In yet other words, who made "personal sovereignty" king and other perspectives (such as virtue theory) outlaws and rebels?

In short, Kraus and Scott's Case Against Equity founders for multiple reasons. It assumes its conclusion from the start, fails to engage the best of its academic opponents, reads the history of the common law simplistically, and takes for granted a unitary perspective on ethics.

Even so--even though personal sovereignty may not be the summum bonum of contract law--exactly what place does (or should) virtue play in contract law today? Some thoughts about the practical challenge of pluralism in a few days.